Funeral insurance claim for a still-born child can be tricky

“You need to inform (the Funeral Plan) in writing or telephonically of the birth of a Child whom you want covered in terms of this policy.”

PBM

Household wide funeral insurance can be tricky when a stillborn baby comes into the picture. That’s because a stillborn gives no time for the client to update their insurance coverage list and yet one cannot pre-update the list. And there will be issues on whether the stillborn fits into number limitations of the insurance policy with many insurance capping the number of children that are automatically covered between 3 and 5.

A case attended to by the Long Term Insurance Ombudsman is helpful in clarifying the basic principles that should guide all parties. Here follows a summary of the case as presented by the Ombudsman:

The background

Funeral Plan required notification of a child’s birth for the child to be added to the policy – claim for a still-born child.

The policyholder was a member of a group scheme that provided funeral cover for his family. In May 2012 he submitted a death claim for his still-born child and the insurer confirmed that the claim had been approved. He did not receive the payment, however, and requested our office to investigate the matter as the insurer did not respond to his enquiries.

He had selected a Plan D option at inception of his policy, to which for no extra premium he had added his spouse and five children, for which the policy provided R 20 000 cover. The policy schedule provided additional cover, at a claim value of R 10 000, for a further three children at an extra premium.

In the policy children were dealt with as follows:

“Clause 7.2.3 – CHILD or CHILDREN A Child means:

A Child by birth, including a Child still-born (following 28 weeks of pregnancy and not as a result of wilful abortion) while the policy is in force, …..

You need to inform (the Funeral Plan) in writing or telephonically of the birth of a Child whom you want covered in terms of this policy. No waiting period in respect of cover will apply provided such notification is received by (the Funeral plan) within 60 (sixty) days of the birth of the Child.

…..5 (five) Children can be covered under the Funeral Plan at no additional premium.

3 (three) Additional children may be covered by the Funeral Plan at an additional monthly premium.”

The limits

The insurer confirmed that the claim was declined because the still-born child was the sixth child on the policy.

Because the policy-holder was unable to register a child before it was born and yet still-born children were covered, we were of the opinion that the claim should be considered and that the premium for that month should be deducted from the claim proceeds.

In correspondence that followed the insurer confirmed that subsequent to the claim the main member had added three more children to the policy, which meant that the maximum of eight children were covered. The main member confirmed that all of them were his children. The insurer advised that in order for the children to be covered they had to be added prior to the claim event happening, in other words prior to death, but this was of course not possible in the case of a still-birth. We drew their attention to the definition of a child in the policy, and said we were of the view that a valid claim existed as the main member had advised the insurer of the birth/death as soon as it had occurred.

The claim was then reviewed by the insurer, who confirmed that it had been incorrectly declined and that they would be settling the claim but deducting the unpaid premium. They further confirmed that a similar case had been reassessed as a result of this case.

The U-turn

A few days later, however, the insurer advised that the case had been reassessed and had again been rejected as the still-born child was actually the ninth child on the policy, the main member having already added three additional children. We requested the dates that the three additional children had been added and the insurer advised that they had been added on 15 May 2012. As the still-born child was born on 23 May 2012 and died on the 24 May 2012 we agreed that the claim could not be considered, as cover was only available for eight children on the policy.

We did however suggest that the insurer consider making the policy-holder a compensatory award for the poor service he received and the way in which the claim was handled. The insurer agreed that they would make an ex-gratia payment of R 5 000.

They further advised that in the future should a policy-holder have a still-born child the claim would be handled as follows:

If the still-born child was one of the five children the claim would be considered and no premium would be deducted as the premium is packaged.

For a sixth, seventh or eighth child the claim would be considered but the premium for that month would be deducted from the claim proceeds.

If the still-born child was a ninth or further child the claim would not be considered.